Setting Up a Charity in the USA: A Step-by-Step Guide

Starting a charity is a noble endeavor, but it requires careful planning and adherence to legal guidelines. This guide outlines the key steps to establish a 501(c)(3) nonprofit organization in the United States.

Before You Begin
  • Seek Professional Advice: Consult a U.S.-based lawyer experienced in nonprofit law to ensure compliance with legal requirements.
  • Prepare for Financial Oversight: Tax returns must be filed annually with the IRS. Partnering with a U.S. accountant who specializes in nonprofits is highly recommended. Note that these professional services will involve additional costs.
1. Research and Planning
  • Define Your Purpose: Clearly articulate your charitable mission and objectives.
  • Study Similar Organizations: Research other charities in your area of interest to understand their structure and operations.
  • Develop a Business Plan: Outline your goals, programs, and potential funding sources to establish a solid foundation for your organization.
2. Choose a Name
  • Unique and Descriptive: Select a name that reflects your mission and resonates with your audience.
  • Ensure Availability: Verify that your chosen name is not already in use or trademarked.
3. Incorporate Your Organization
  • Choose a State: Decide where to incorporate your nonprofit. Requirements may vary by state.
  • File Articles of Incorporation: Submit the necessary documents to the state agency, ensuring your articles include the IRS-required language for 501(c)(3) status.
4. Appoint a Board of Directors
  • Assemble a Team: Recruit board members who align with your vision and can contribute to your mission.
  • Define Roles: Clearly outline responsibilities for each board member to ensure smooth operations.
5. Draft Bylaws
  • Governance Framework: Create bylaws that detail how your organization will operate.
  • IRS Compliance: Include specific provisions required for obtaining 501(c)(3) tax-exempt status.
6. Apply for an EIN
  • Obtain an Employer Identification Number: Apply through the IRS. The EIN acts as a unique identifier for your nonprofit, similar to a Social Security number for individuals.
7. File for 501(c)(3) Tax-Exempt Status
  • Choose the Correct Form: Complete IRS Form 1023 for comprehensive applications or Form 1023-EZ for simplified filings (if eligible).
  • Pay Filing Fees: Submit the required payment along with your application.
8. Await IRS Approval
  • Review Process: The IRS will assess your application and may request additional information.
  • Determination Letter: Once approved, you will receive official confirmation of your 501(c)(3) status.
9. Register with Your State
  • Charity Registration: Some states require nonprofits to register with a charity regulator or solicitation office to conduct fundraising activities legally.
10. Ensure Compliance and Reporting
  • IRS Reporting: File annual Form 990 returns to maintain tax-exempt status.
  • State Requirements: Adhere to specific state reporting and compliance guidelines.
  • Financial Records: Maintain accurate and detailed records of your organization’s transactions and activities.
11. Launch Fundraising and Operations
  • Implement Programs: Begin your charitable initiatives.
  • Raise Funds: Develop and execute fundraising strategies to sustain your organization.

Important Note:
The process of setting up a 501(c)(3) charity involves legal and administrative complexities that may vary based on your location and circumstances. Consult with legal and financial professionals specializing in nonprofit law to ensure compliance and a smooth setup process.

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Forbes provides useful information on how to set up a US charity here.
Investopedia also provide useful information